ATO Interpretative Decision
ATO ID 2003/993
Goods and Services Tax
GST and the supply of disability services where the service provider receives block fundingFOI status: may be released
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Is the entity, a disability support service provider, making a GST-free supply under section 38-40 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies disability support services, for which it receives block funding, to a client who pays for the disability services in full?
Decision
Yes, the entity is making a GST-free supply under section 38-40 of the GST Act when it supplies disability support services, for which it receives block funding, to a client who pays for the disability services in full.
Facts
The entity is a disability support service provider. The entity supplies disability services to a particular client with a disability. The entity charges this client for the disability services and for all overheads associated with the provision of these services.
The entity receives funding under a State law, which is complementary to the Disability Services Act 1986, to supply disability services to its clients.
This funding comes in the form of 'block funding' and 'packages'. The block funding is provided to help fund the general provision of disability services to its clients.
Package funding is provided for the purpose of funding services to particular clients. This particular client is not one of the clients for which package funding is provided.
The terms of the service agreement, between the entity and the government agency that provides the funding, do not restrict the entity from applying all or some of the block funding towards providing disability services to the client. The entity does not apply any of the block funding towards providing disability services to the client.
The entity is registered for goods and services tax (GST).
Reasons for Decision
A supply of services is GST-free under section 38-40 of the GST Act, if the supplier receives funding under the Disability Services Act or under a complementary State law or Territory law in respect of the services.
The entity receives funding under a State law that is complementary to the Disability Services Act. Therefore, if this funding is in respect of the services provided to the client, the entity's supply will be GST-free.
This funding comes in the form of 'block funding' and 'packages'. The package funding is provided for the purpose of funding services to particular clients. However, this particular client is not one of the clients for which this funding is provided.
The block funding is provided to help fund the general provision of disability services to its clients. While the entity does not apply any of the block funding towards providing disability services to the client, the service agreement that the entity has with the government agency does not restrict the entity from applying all or some of the block funding towards providing disability services to the client.
The entity has the option to apply the funding to the supply of services to this particular client, if the entity chooses to do so. Therefore, the block funding is in respect of the general provision of disability services to its clients including the services provided to the client. This is not altered by the fact that the client pays in full for these services.
Accordingly, the entity is making a GST-free supply under section 38-40 of the GST Act when it supplies disability support services, for which it receives block funding, to a client who pays for the disability services in full.
Date of decision: 4 July 2003
Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
section 38-40
the Act
Keywords
Goods and services tax
GST free
GST health
Section 38-40 - specialist disability services
ISSN: 1445-2782